How to Start Your Business - 10 Week Challenge
Most budding entrepreneurs postpone budget planning until the very last minute. When the time has come to start spending money to set up the business, new entrepreneurs wake up and create a budget in about 30 minutes.
Most new entrepreneurs are talented and sound in the core area of their business. Though they have sound expertise in their domain, most new entrepreneurs have one thing in common. They hate accounts and numbers. As a result, the new entrepreneur procrastinates the budgeting part as much as possible.
Prepare a simple initial investment approximation
You do not need to turn into an accountant with a calculator to prepare a simple budget. You only have to list down everything you need, find out how much it costs and total it up. If you have a little common sense, you do not need any other skills.
Expenses for a business fall under two categories.
- The initial money you require for the business to be ready to launch
- The monthly or annual running expense to keep the business running.
This week, you have to complete the first part, calculating the total initial investment you need.
Calculate your initial investment
The article - How to prepare a budge for your business, guides you on how to go about it. The article contains the activity to calculate monthly expenses and revenue projections as well. Do not calculate the monthly running expense for now because that is your activity for the next week.
Here are some tips on preparing your initial expense sheet
- Add one item per row
- Add the cost for every item no matter how small
- If you do not know the cost of an item for now, either add an approximate value based on your gut feeling or try to get an idea by looking up online
- Have a column for each item where you mention whether it is a "want" or "a need." If your business will suffer without that item, mark it as a "need". If the item is more of a nice to have, mark it as a "want". This column will help you reduce costs if necessary.
- Account for buffer cash. No matter how accurately you estimate your initial costs, you face the risk of increased expenses due to unforeseen circumstances. Account for 10-20% of your total initial estimate as a safety margin.
Things to remember
Do not worry about the cost piling up. A common mistake is to note down a value lesser the real expense just to make yourself feel relieved. Do not make that mistake. Add the values as is and total them. If you find the total humongous, do not sweat it out. You can find ways to minimize the value later.